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War is often described as long periods of interminable boredom punctuated by moments of sheer terror. For currency traders, Non-Farm Payrolls day is very much the same – volatility spiked this morning at 8:30 Eastern Time when twin employment reports were released north and south of the border.
The United States turned in a solid performance, generating 252,000 jobs in December, driving the unemployment rate down to a five year low in the world’s largest economy.  Wage growth fell however, easing pressure on Janet Yellen to hike rates later this year.
In contrast, the Canadian economy shed 4,300 jobs in December, but most of the net decline was driven by the fact that 57,700 part-time jobs were eliminated, while 53,500 full-time were created. As we have expected for some time, job losses in the energy sector increased, while the manufacturing sector has only slowly begun to rebound.
It is this performance gap that is weighing on the Canadian dollar – prior to the twin announcements, the loonie had been receiving some lift from a stabilizing oil price, but soon fell back as investors downgraded yield expectations.
The euro remains pinned under the weight of market expectations ahead of the European Central Bank meeting scheduled for February 22nd. After months spent telegraphing its intent to do so, the institution is believed to be preparing a quantitative easing programme aimed at boosting lending to small and medium-sized businesses across the common currency area.
However, as Mark Twain put it, “It ain’t what you don’t know that gets you in trouble. It’s what you know that just ain’t so”.
If policymakers fail to deliver against market assumptions, a violent reversal could take place. Even if expectations are met, a ‘sell the rumour, buy the news’ dynamic could drive the euro higher after the announcement.
As such, we would suggest that readers with euro exposures consider placing automated market orders that can be executed during periods of high volatility. The window of opportunity may be extraordinarily brief.
In our latest podcast, we talk about  EUR/USD crash, FOMC minutes, US jobs and Venezuela with oil